David Zeiger : Open Letter to Michael Moore from a Madoff Victim

I was stunned to see you take a broad, uninformed swipe at everyone who invested money with [Bernie] Madoff. You say he ‘stole $65 billion from some already quite wealthy people,’ referring to his victims as his ‘own kind.’

By David Zeiger / The Rag Blog / May 11, 2009

See ‘Bernie Madoff, Scapegoat,’ by Michael Moore, Below.

Dear Mike,

I read with much interest your piece “Bernie Madoff, Scapegoat” for Time Magazine. While I welcomed your main premise — that Madoff is a scapegoat and not more than a scab on the open, puss-filled, legal wound called the “American Financial System” — I was stunned to see you take a broad, uninformed swipe at everyone who invested money with Madoff. You say he “stole $65 billion from some already quite wealthy people,” referring to his victims as his “own kind.” Then you go on to make the incredible claim that most of these supposedly very rich people knew full well (or at least suspected) that they were part of a fraud and, essentially, hoped it would just go on forever. So they should stop their whining and just give all their stolen luchre back.

That’s quite an argument. Let me say first of all, for full disclosure, that most of my family was among those supposedly “already quite wealthy people” who lost everything to Madoff. In our case, it was Stan Chais, one of his top “feeders,” who gave over all of our life savings to him. But somehow I don’t quite see us fitting your definition of people on his “side of the tracks,” as you so casually claim. Yes, like the vast majority of the thousands of Madoff’s investors, we weren’t poor. Far from it. My father was a businessman who manufactured parts for airplanes and did quite well with his small company that he started in the fifties (as I always joked, he was the white man for the white time). He was a lifelong progressive liberal, who took great pride in hiring blacklisted writer friends in the fifties, fighting against the Vietnam War in the sixties, and leading the campaign for Pete Seeger to receive the Kennedy Center Honor in the nineties.

And yes, back in the late eighties he quite willingly joined Stan Chais’s “investment” group-seeking stability and good, not massive profits. And that’s what he got for over twenty years, in the hands of a man who he, a smart businessman, trusted completely. And he brought all of his family and many of his friends into the fold because it was just too good to pass up. That included school teachers, artists, writers, doctors, lawyers, and one struggling documentary filmmaker (you remember what that was like). Maybe not the salt of the earth, but a far cry from the “one percenters” you have thrown us in with.

And if you go to the New York Times web site, you will find the letters from several hundred of Madoff’s victims to the judge hearing the case — all with very similar stories, often with quite progressive backgrounds, mostly elderly people who had invested all of their retirement savings with him, many now penniless.

But, you claim, it should have been obvious to all of these supposedly intelligent people that the interest they were receiving was impossibly high and they were part of a fraud. Why, according to you, “Some have admitted they did have an inkling ‘something was up.'” But you fail to mention that the people who didn’t have an inkling “something was up” were the very ones most “intelligent” people look to for guidance-the SEC, who as recently as 2006 were telling the world that Madoff was right as raindespite the compelling evidence that they alone were privy to. Blaming Madoff’s victims for not seeing what was being denied by every available source is absurd.

But whether they knew or not, if they took any money out they should give it back, right? “If I buy a stolen car from the guy down the street, the police will take that car from me regardless of whether I knew it was stolen.” That’s logical, but what if that guy was in my garage stealing my other car at the same time? That’s how Ponzi schemes work, and the relatively few who made huge profits from it don’t negate that reality.

Let’s be honest and take your argument a step further. Hundreds of thousands of people over the last 20 years were conned into buying homes with sub-prime mortgages, all of which were pumped up and turned into massive boondoggles by the schemes called derivatives and credit default swaps (which make Madoff look like a rank amateur). They were, in essence, built on stolen “profits.” So now should the people who bought those houses be made to give them back? You know full well that there are those making that argument, and in fact thousands are today being forced out of their houses by foreclosure. Are they getting their just deserts?

Of course you would never say that, but what’s the difference here? Yes, there is an economic gap between people who invested with Madoff and people who bought houses with sub-prime mortgages, but the con is essentially the same, is it not?

Here’s a thought: Given the quite liberal bent of many of Madoff’s investors, I’d be willing to bet the little money I have left that somewhere, somehow, funds that had gone through Bernie’s hands and came out bigger helped finance one of your films. I’m not being facetious here. I’m a big fan. But as you so cogently point out, in the Alice in Wonderland world of American finance the veil between “legal” and illegal is infinitely porous. And after all, if you buy a stolen car!

In hindsight, every argument my father made in defense of this fund was glaringly and horrendously wrong. But that’s easy to say now. I think I’m a pretty smart guy, and I wasn’t even the one who got us into this thing, but even after Madoff was exposed I was still claiming it was impossible for Stan Chais to be part of such a scheme. Stan, and the man he was serving, turned out to be con men of the highest order, and my dad had huge blinders on that led him to the slaughter. Yes, we all “benefited” — for a while and to varying degrees — from this scheme (that is, before we lost everything). But putting us up there with the head of Goldman Sachs and Bank of America? Please!

Yours in the spirit of healthy debate,
David Zeiger

P.S. I am producing a film about my family’s situation, titled Ponzi & Me (catchy title, don’t you think?). If you would like to invest in it, I can guarantee a return of 15-20%.

Bernie Madoff, Scapegoat

Elie Wiesel called him a “God.” His investors called him a “genius.” But, proving correct that old adage from the country and western song, you never really know what goes on behind closed doors.

Bernie Madoff, for at least 20 years, ran a Ponzi scheme on thousands of clients, among them the people you and I would consider the best and brightest. Business leaders, celebrities, charities, even some of his own relatives and his defense attorney were taken for a ride (this has to be the first time a lawyer was hosed by the client).

We’re clearly in one of those historic, game changing years: up is down, red is blue and black is president. Aside from Obama himself, no person will provide a more iconic face of this end-of-capitalism-as-we-know-it year than Bernard Lawrence Madoff.

Which is too bad. Yes, he stole $65 billion from some already quite-wealthy people. I know that’s upsetting to them because rich guys like Bernie are not supposed to be stealing from their own kind. Crime, thievery, looting – that’s what happens on the other side of town. The rules of the money game on Park Avenue and Wall Street are comprised of things like charging the public 29% credit card interest, tricking people into taking out a second mortgage they can’t afford, and concocting a student loan system that has graduates in hock for the next 20 years. Now that’s smart business! And it’s legal. That’s where Bernie went wrong – his scheming, his trickery was an outrage both because it was illegal and because he preyed on his side of the tracks.

Had Mr. Madoff just followed the example of his fellow top one-percenters, there were many ways he could have legally multiplied his wealth many times over. Here’s how it’s done. First, threaten your workers that you’ll move their jobs offshore if they don’t agree to reduce their pay and benefits. Then move those jobs offshore. Then place that income on the shores of the Cayman Islands and pay no taxes. Don’t put the money back into your company. Put it into your pocket and the pockets of your shareholders. There! Done! Legal!

But Bernie wanted to play X-games Capitalism, run by the mantra that’s at the core of all capitalistic endeavors: Enough Is Never Enough. You have the right to make as much as you can, and if people are too stupid to read the fine print of their health insurance policy or their GM “100,000-mile warranty,” well, tough luck, losers. Buyers beware!

It would be too easy – and the wrong lesson learned – to put Bernie on TIME’s list all by himself. If Ponzi schemes are such a bad thing, then why have we allowed all of our top banks to deal in credit default swaps and other make-believe rackets? Why did we allow those same banks to create the scam of a sub-prime mortgage? And instead of putting the people responsible in the cell block in Lower Manhattan, where Bernie now resides, why did we give them huge sums of our hard-earned tax dollars to bail them out of their self-inflicted troubles? Bernard Madoff is nothing more than the scab on the wound. He’s also a most-needed and convenient distraction. Where’s the photo on this list of the ex-chairmen of AIG, Merrill Lynch and Citigroup? Where’s the mug shot of Phil Gramm, the senator who wrote the bill to strip the system of its regulations, or of the President who signed that bill? And how ’bout those who ran the fake numbers at the ratings agencies, the lobbyists who succeeded in making sleazy accounting a lawful practice, or the stock market itself – an institution that’s treated like the Holy Sepulchre instead of the casino that it is (and, like all other casinos, the house eventually wins).

And what of Madoff’s clients themselves? What did they think was going on to guarantee them incredible returns on their investments every single year – when no one else on planet Earth was getting anything like that? Some have admitted they did have an inkling “something was up,” but no one really wanted to ask what it was that was making their money grow on trees. They were afraid they might find out it had nothing to do with gardening. Many of Madoff’s victims have told investigators that, over the years, they have made much more than the original investment they gave Bernie. If I buy a stolen car from the guy down the street, the police will take that car from me regardless of whether I knew it was stolen. If I knew it was stolen, then I go to jail for receiving stolen property. Will these “victims” give back their gains that were fraudulently obtained? Will the head of Goldman Sachs reveal what he was doing at the meetings with the Fed chairman and the Treasury secretary before the bailout? Will Bank of America please tell us what they’ve spent $45 billion of our TARP money on?

That’s probably going too far. Better that we just put Bernie on this list.

[David Zeiger, a contributor to The Rag Blog, is an award-winning film producer and director whose highly–acclaimed film Sir! No Sir! documented the little-known GI resistance to the Vietnam War. His production company is Displaced Films.]

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